US fintech SoFi targets mortgage lending in Australia

One of the best-funded financial technology companies in the US, SoFi, is preparing to launch in Australia to offer mortgages in direct competition with the banks.

In recent days, the San Francisco-based SoFi has used LinkedIn to advertise for a manager of mortgage operations, based in Sydney, along with an operations manager and a marketing manager.

The pending opening in Sydney would be SoFi's first office outside the US, where it has funded more than $US14 billion in student loan refinancing, personal loans and mortgages since it was founded in 2011. Over the past two years, SoFi, which used to be called Social Finance, has raised $1 billion in new equity funding and grown staff numbers from 200 to 700.

The desire of SoFi to break into Australia's $1.5 trillion mortgage market will be closely watched by Australian banks given home loans comprise the majority of their assets.

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While fintech disrupters are nipping at other parts of banking such as personal or business loans, and some fintechs are working at the edges of the mortgage market by setting up new broking platforms, no fintech start-up has directly targeted banks' mortgage lending books.

The job advertisement for the new mortgage operations manager said the successful candidate would be "responsible for building out an in-house mortgage customer service and underwriting operation to serve SoFi's new mortgage business line".

SoFi, which has been profitable since 2014, was initially established as a peer-to-peer lending platform for US college loans, allowing students at prestigious universities to borrow from well-heeled graduates of the same unis at rates lower than what are typically offered by US government schemes.

SoFi has moved away from the P2P model – its funding now comes from securitisation markets and on-selling loans to institutions and banks – and it has continued to expand into other financial services including mortgages, wealth advice and, most recently, life insurance.

Anshu Jain, the former co-CEO of Deutsche Bank, was appointed as an adviser to the SoFi board in 2016. Jason Alden

Like many other technology start-ups in Silicon Valley, SoFi's corporate philosophy is driven by personalised customer service – in a way that is very un-bank like. According to a profile of the company in The Economist last year, its highly automated mortgage applications happen over smartphones; borrowers, who are called "members", get invited to parties to network; entrepreneurs can use its offices for meetings; and SoFi provides a service to help members find a new job if they lose their existing one. Its marketing campaigns suggest winning loan approval is akin to gaining entry to a select club.

SoFi said last year its Net Promoter Score (NPS), which measures how likely a customer is to recommend it to another person, reached 90 in late 2015; at some of the Australian banks, NPS is negative.

SoFi raised $US1 billion in a Series E funding round in September 2015, led by the Japanese telecoms group Softbank, in a deal valuing SoFi at $US4 billion. Softbank wants SoFi to strive for a valuation of $US100 billion, The Economist reported.

Other investors include Wellington Management and US venture capital funds funds Baseline Ventures, DCM Ventures and GGV Capital, which also has a stake in Alibaba.

SoFi co-founder and CEO is Mike Cagney, a former trader at Wells Fargo. The former co-CEO of Deutsche Bank, Anshu Jain and former US Securities and Exchange Commission chairman Arthur Levitt are advisers to the company.

Correction: The initial version of this story said SoFi had made more than $US7 billion of loans, which was a figure published by the company in early 2016. It has now made more than $US14 billion. SOFi also confirmed it has never made car loans and that Anshu Jain is an advisor to the company, not on the board of directors. The company said in 2016 his appointment as an adviser would lead to an eventual board seat.

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James Eyers writes on banking, fintech and technology. Based in our Sydney newsroom, James is a former Legal Affairs and Capital editor for the Financial Review Connect with James on Twitter. Email James at jeyers@afr.com.au